How Kraft Got Its Innovation Groove Back

Kraft Foods Group has spent the last three years getting its innovation groove back, company leaders said today at the annual Consumer Analyst Group of New York (CAGNY) Conference in Boca Raton, Fla. The $18-billion-in-revenues food products company with iconic brands like Maxwell House, Oscar Mayer and JELL-O became an independent company last October after a corporate split of legacy Kraft’s North American grocery business and its global snacking business, which is now called Mondelez International.

Speaking at CAGNY for the first time since the spinoff, Kraft Foods CEO Tony Vernon outlined a growth strategy focused on harnessing its 25,000 employees and driving meaningful innovation, which has previously been a sore spot for the company. “We understand our obligation to innovate and contemporize,” Vernon said. “This is not your father’s Kraft.”

In a lively presentation, Barry Calpino, VP of Breakthrough Innovation, outlined how Kraft went from “worst to first” on a “transformational journey where innovation went from one of our biggest weaknesses to one of our biggest strengths.” In 2008, the company ranked next to last in its peer group for new product successes. An embarrassing 17 out of 19 product launches that year were considered failures, with little improvement seen in 2009. An outside company brought in to consult on its innovation process reported back, “Kraft is where good ideas go to die.” Calpino says by 2010 they decided “enough was enough.” It was time to face the brutal facts and figure out what went wrong and how to create new processes for meaningful innovation. Here’s what they discovered.

New Focus On Fewer, Bigger, Better Ideas

“We had gotten locked into bad habits,” said Calpino. One was a lack of focus, where the quantity of new launches was emphasized over the quality of each. Calpino called it the “field of dreams” strategy, thinking if we launch it, they will come. In mid-2010, they decided to focus on the really big ideas that had true potential. “We went with 13 big bets, got serious about tracking them and invested heavily,” he said. The act of focusing contributed to the birth of three new $100 million platforms: MiO beverage mixes, Oscar Mayer Selects deli meats, and Velveeta Skillet packaged meals.

Company Culture Shifts

“We had become a culture of ‘we can’t,’” said Calpino. Internally, innovation wasn’t prioritized and was even considered by many a “dead-end” career track. To combat the malaise, “we fueled a movement,” he said. They celebrated the innovators, making them the heroes and rock stars of the company. “Positive discontent” became the new mantra, encouraging employees to get angry and motivated enough to make change rather than disengaging. Soon, some of the company’s harshest critics became supporters.

A Deeper Commitment

“Year two is just as important and often more important than year one, but most companies pull way back after the launch year,” said Calpino. “We went just as big in year two as in year one.” MiO grew more than 60% in that second year. It also showed Kraft employees that they were dedicated to new innovation and meant what they said, which further fueled the culture shift. Going forward, Calpino said they’re committed to continuously learning and being consistent in execution, saying: “It’s just as easy to slip back to worst. Our innovation must be consistent.”

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